Mortgage overpayment calculator
Find out what paying a bit extra each month saves you in interest, and how many years it takes off the term.
What an extra payment actually buys
Every pound overpaid goes straight against the capital, so it stops accruing interest for the rest of the term. That is why a modest monthly overpayment early in a mortgage removes a disproportionate amount of interest: the pound you pay today would otherwise have been charged interest for another twenty years.
A worked example
A £200,000 balance at 4.5% with 22 years left costs about £1,195 a month. Add £150 and the mortgage clears in 218 months rather than 264, so it finishes nearly four years early.
The interest charged falls from around £115,400 to £93,100. Total handed over across the whole mortgage drops from roughly £315,400 to £293,200, a saving of about £22,000 for finishing sooner.
The two things to check first
Most fixed deals cap penalty-free overpayments, commonly at 10% of the outstanding balance a year. Exceeding the cap triggers an early repayment charge that can wipe out the benefit, so the allowance in your mortgage offer sets the sensible ceiling.
Then tell the lender what to do with the overpayment. Reducing the term is what produces the saving shown here. Some lenders reduce the monthly payment instead and leave the term alone, which saves far less.
When not to overpay
Clear higher-cost debt first, credit cards and car finance almost always cost more than a mortgage. Keep an accessible emergency fund, because money paid into a mortgage is hard to get back out. And if a savings account pays more after tax than the mortgage charges, saving beats overpaying on the numbers.
Starting from scratch instead? The repayment calculator works out the monthly cost from price, deposit and term.
Common questions
How much can I overpay without a penalty?
Most fixed deals allow 10% of the outstanding balance each year without an early repayment charge. Some allow more, a few allow none. The figure is in your mortgage offer, and going over it usually costs a percentage of the excess.
Is it better to shorten the term or overpay?
Financially they are close to identical if the amounts match. Overpaying keeps the flexibility to stop, while shortening the term locks in the higher payment. Most people are better served by overpaying voluntarily.
Should I overpay or save the money instead?
Compare your mortgage rate with the rate you could earn after tax. If savings pay more than the mortgage costs, saving wins on the numbers. If the mortgage rate is higher, overpaying wins. Clearing higher-cost debt beats both.
Does the lender reduce my payment or my term?
It depends on the lender and what you ask for. Reducing the term is what saves the interest shown here. Some lenders default to lowering the monthly payment instead, which saves far less, so tell them which you want.